Buipe is a public limiited liability company. In order to expand its operations, Haven entered into a five year lease of a vuilding on January 1st 2021. The building had a remaining useful life of 10 years. Haven has agreed to make rental payments of $75,000 per annum at the beginning of each year. The agreement does not provide for the transfer of the asset at the end of the lease term and there is no purchase option. Haven made a payment of $35,000 as initial direct cost and receives lease incentive of $7,500. The interest rate implicit in the lease is not immediately determinable.The leases incremental borrowing is 5%. At the commencement date, Haven pays the initial $75,000, incurs the direct cost and receives lease incentive. 1. Demonstrate how the lease will be accounted for in the five year period in the financial statements.

2. Prepare Statement of Profit or Loss and statement of financial position extracts for the 5 year period.